Deciding your exit conditions in advance
- Author
- CRYPTO PORT Editorial
- Published
- Updated
- Reading time
- 6 min
In short
One approach is to decide what would make you let go before prices move — including the decision to realise a loss, put into words ahead of time. This site names no level or condition, and having an exit plan does not prevent losses.
Key points
- Set exit conditions before prices move — set them mid-move and the situation sets them for you
- Conditions need not be prices: a broken assumption or a change in your own circumstances counts
- The decision to realise a loss belongs in the plan too
- Plans do not always execute — in violent markets you may fill far from where you intended
Definition
Defining in advance what would end a holding — not necessarily a price, but also a changed assumption or situation.
The point of deciding an exit early is to avoid making the call while your inputs are distorted. Mid-move, fear and excitement mix into the reasoning, and a conclusion reached then tends to differ from one reached calmly. Written in advance, the conditions at least leave you a record of what you thought when you were thinking clearly.
The conditions need not be prices, and non-price ones are often easier to articulate. The premise you gave for holding no longer holds. Development or governance has diverged from what was described. You need the money for something in your own life. You have been losing sleep over the price for weeks. Any of these can be a trigger to reconsider.
Crucially, the decision to realise a loss belongs in the plan too. What to do about a holding that is down is among the hardest calls to make in the moment. 'Wait until it comes back' is a decision as well, but chosen without prior thought it is usually just the residue of being unable to decide. At what level, and in what state, you would let go is yours to set — this site names no level.
Finally, allow for a plan not executing as written. In violent conditions orders may not fill where you expected, and exchange systems can slow. An exit plan is a way of doing the thinking in advance; it is not a guarantee of exiting at the price you had in mind.
Watch out for
- · This is not investment advice and recommends no price level, exit condition or trade
- · Having exit conditions does not prevent losses
- · In fast markets, orders may not execute at the price you expected
Frequently asked questions
Does a stop order make the plan execute?
It removes the need to act manually, but if the price gaps, the fill can be well away from the level you set, and during an exchange outage it may not execute at all.